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NFLX » Topics » Subscription

This excerpt taken from the NFLX 10-Q filed May 8, 2009.

Subscription

 

     Three Months Ended     Change  
     March 31,
2009		     December 31,
2008		     March 31,
2008		     Q1’09 vs.
Q1’08		     Q1’09 vs.
Q4’08		  
     (in thousands, except percentages)  

Subscription

    $ 215,299     $193,635     $ 187,156     15.0 %   11.2 %

As a percentage of revenues

      54.6 %   53.9 %     57.4 %    

Three months ended March 31, 2009 as compared to the three months ended March 31, 2008

The increase in cost of subscription revenues for the three months ended March 31, 2009 as compared to the same prior-year period was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 17%, which was driven by a 25% increase in the number of average paying subscribers, partially offset by a decline in monthly DVD rentals per average paying subscriber attributed to the growing popularity of our lower priced plans.

 

  •  

Postage and packaging expenses increased by 20%. This was primarily attributable to an increase in the number of DVDs mailed to paying subscribers and to an increase in the rates of first class postage in May 2008.

 

  •  

Content expenses increased by 10%. This increase was primarily attributable to increased investments in streaming content.

Three months ended March 31, 2009 as compared to the three months ended December 31, 2008

The increase in cost of subscription revenues for the three months ended March 31, 2009 as compared to the three months ended December 31, 2008 was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 16%, which was driven by a 9% increase in the number of average paying subscribers and an increase in monthly DVD rentals per average paying subscriber attributed to a seasonal increase in disc usage.

 

  •  

Postage and packaging expenses increased by 16%. This increase was primarily attributable to an increase in the number of DVDs mailed to paying subscribers and the monthly DVD rentals per average paying subscriber due to a seasonal increase in disc usage.

 

  •  

Content expenses increased by 6%. This increase was primarily attributable to a seasonal increase in content acquisitions.

 

17

Table of Contents
These excerpts taken from the NFLX 10-K filed Feb 25, 2009.

Subscription

Cost of subscription revenues consists of postage and packaging costs related to shipping DVDs to subscribers as well as content related expenses. Costs related to free-trial periods are allocated to marketing expenses.

Postage and Packaging.    Postage and packaging expenses consist of the postage costs to mail DVDs to and from our paying subscribers and the packaging and label costs for the mailers. Between January 8, 2006 and May 13, 2007, the rate for first-class postage was $0.39. The U.S. Postal Service increased the rate of first class postage by 2 cents to $0.41 effective May 14, 2007 and by one cent to $0.42 effective May 12, 2008. We receive discounts on outbound postage costs related to our mail preparation practices.

Content Expenses.    We obtain titles from studios and distributors through direct purchases, revenue sharing agreements or license agreements. Direct purchases of DVDs normally result in higher upfront costs than titles obtained through revenue sharing agreements. Content related expenses consist of costs incurred in obtaining titles such as amortization of content and revenue sharing expense.

Subscription

Cost of subscription revenues consists of postage and packaging costs related to shipping DVDs to subscribers as well as content related expenses. Costs related to free-trial periods are allocated to marketing expenses.

Postage and Packaging.    Postage and packaging expenses consist of the postage costs to mail DVDs to and from our paying subscribers and the packaging and label costs for the mailers. Between January 8, 2006 and May 13, 2007, the rate for first-class postage was $0.39. The U.S. Postal Service increased the rate of first class postage by 2 cents to $0.41 effective May 14, 2007 and by one cent to $0.42 effective May 12, 2008. We receive discounts on outbound postage costs related to our mail preparation practices.

Content Expenses.    We obtain titles from studios and distributors through direct purchases, revenue sharing agreements or license agreements. Direct purchases of DVDs normally result in higher upfront costs than titles obtained through revenue sharing agreements. Content related expenses consist of costs incurred in obtaining titles such as amortization of content and revenue sharing expense.

Subscription

 

     Year Ended December 31,  
     2008     2007     2006  
     (in thousands, except percentages)  

Subscription

    $ 761,133     $ 664,407     $ 532,621  

As a percentage of revenues

      55.8 %     55.1 %     53.4 %

Percentage change over prior period

      14.6 %     24.7 %  

The increase in cost of subscription revenues in absolute dollars for 2008 as compared to 2007 was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 19%. This was driven by a 23% increase in the number of average paying subscribers, partially offset by a decline in monthly DVD rentals per average paying subscriber attributed to the continued growth of our lower priced plans.

 

  •  

Postage and packaging expenses increased by 23%. This was primarily attributable to the increase in the number of DVDs mailed to paying subscribers and increases in the rates of first class postage in May 2007 and May 2008.

 

  •  

Content expenses increased by 7%. This increase was primarily attributable to the increased investments in streaming content in 2008, as well as an increase in DVD revenue sharing costs.

The increase in cost of subscription revenues in absolute dollars for 2007 as compared to 2006 was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 20%. This was driven by a 32% increase in the number of average paying subscribers, partially offset by a decline in monthly movie rentals per average paying subscriber attributed to the continued growth of our lower priced plans.

 

  •  

Postage and packaging expenses increased by 24%. This was primarily attributable to the increase in the number of DVDs mailed to paying subscribers, as well as an increase in the rate of first class postage of 2 cents in May 2007.

 

  •  

Content expenses increased by 26%. This increase was primarily attributable to the increased acquisition of DVD library with the remaining increase attributable to the investment in streaming content as we introduced Internet delivery of content in January 2007.

 

32

Table of Contents

Subscription

 

     Year Ended December 31,  
     2008     2007     2006  
     (in thousands, except percentages)  

Subscription

    $ 761,133     $ 664,407     $ 532,621  

As a percentage of revenues

      55.8 %     55.1 %     53.4 %

Percentage change over prior period

      14.6 %     24.7 %  

The increase in cost of subscription revenues in absolute dollars for 2008 as compared to 2007 was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 19%. This was driven by a 23% increase in the number of average paying subscribers, partially offset by a decline in monthly DVD rentals per average paying subscriber attributed to the continued growth of our lower priced plans.

 

  •  

Postage and packaging expenses increased by 23%. This was primarily attributable to the increase in the number of DVDs mailed to paying subscribers and increases in the rates of first class postage in May 2007 and May 2008.

 

  •  

Content expenses increased by 7%. This increase was primarily attributable to the increased investments in streaming content in 2008, as well as an increase in DVD revenue sharing costs.

The increase in cost of subscription revenues in absolute dollars for 2007 as compared to 2006 was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 20%. This was driven by a 32% increase in the number of average paying subscribers, partially offset by a decline in monthly movie rentals per average paying subscriber attributed to the continued growth of our lower priced plans.

 

  •  

Postage and packaging expenses increased by 24%. This was primarily attributable to the increase in the number of DVDs mailed to paying subscribers, as well as an increase in the rate of first class postage of 2 cents in May 2007.

 

  •  

Content expenses increased by 26%. This increase was primarily attributable to the increased acquisition of DVD library with the remaining increase attributable to the investment in streaming content as we introduced Internet delivery of content in January 2007.

 

32

Table of Contents
This excerpt taken from the NFLX 10-Q filed Nov 3, 2008.

Subscription

 

     Three Months Ended     Change     Nine Months Ended     Change  
     September 30,
2008		     June 30,
2008		     September 30,
2007		     Q3’08 vs.
Q3’07		     Q3’08 vs
Q2’08		     September 30,
2008		     September 30,
2007		     Q3’08 vs.
Q3’07		  
     (in thousands, except percentages)  

Subscription

    $ 186,573     $ 193,769     $ 163,707     14.0 %   (3.7 %)   $ 567,498     $ 495,734     14.5 %

As a percentage of revenues

      54.7 %     57.4 %     55.6 %         56.5 %     54.9 %  

Three and nine months ended September 30, 2008 as compared to the three and nine months ended September 30, 2007

The increase in cost of subscription revenues for the three and nine months ended September 30, 2008 as compared to the same prior-year periods was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 23% and 19%, respectively, in the three and nine months ended September 30, 2008, which was driven by an increase in the number of average paying subscribers of 24% and 23%, respectively. This increase was partially offset by a decline in monthly DVD rentals per average paying subscriber attributed to the continued popularity of our lower priced plans.

 

25

Table of Contents
  •  

Postage and packaging expenses increased by 25% and 24%, respectively, in the three and nine months ended September 30, 2008. This was primarily attributable to an increase in the number of DVDs mailed to paying subscribers and increases in the rates of first class postage in May 2007 and May 2008.

 

  •  

Revenue sharing expenses increased by 25% and 10%, respectively, in the three and nine months ended September 30, 2008. This increase was primarily attributable to an increase in the number of DVDs subject to revenue sharing agreements mailed to paying subscribers coupled with the increases in the number of average paying subscribers.

 

  •  

Content library amortization increased by 9% for the nine months ended September 30, 2008. This increase was primarily due to acquisitions in the content library. The content library amortization for the three months ended September 30, 2008 was relatively flat as compared to the same prior-period.

Three months ended September 30, 2008 as compared to the three months ended June 30, 2008

The decrease in cost of subscription revenues for the three months ended September 30, 2008 as compared to the three months ended June 30, 2008 was primarily attributable to the following factors:

 

  •  

Content library amortization decreased by 17%. This was primarily attributable to decreased content library acquisitions resulting from a decline in the purchase of new release DVDs.

 

  •  

Revenue sharing expenses decreased by 5%. This was primarily attributable to a decrease in the number of DVDs subject to revenue sharing agreements mailed to paying subscribers.

 

  •  

The number of DVDs mailed to paying subscribers increased by 2%. This increase was primarily attributed to the increase in the number of average paying subscribers.

 

  •  

Postage and packaging expenses increased by 3%. This increase was primarily attributable to the increase in the number of DVDs mailed to paying subscribers, as well as the increase in the rates of first class postage effective May 2008.

This excerpt taken from the NFLX 10-Q filed Aug 11, 2008.

Subscription

 

     Three Months Ended     Change     Six Months Ended     Change  
     June 30,
2008		     March 31,
2008		     June 30,
2007		     Q2’08 vs.
Q2’07		     Q2’08 vs
Q1’08		     June 30,
2008		     June 30,
2007		     Q2’08 vs.
Q2’07		  
     (in thousands, except percentages)  

Subscription

    $ 193,769     $ 187,156     $ 166,838     16.1 %   3.5 %   $ 380,925     $ 332,027     14.7 %

As a percentage of revenues

      57.4 %     57.4 %     54.9 %         57.4 %     54.5 %  

Three and six months ended June 30, 2008 as compared to the three and six months ended June 30, 2007

The increase in cost of subscription revenues for the three and six months ended June 30, 2008 as compared to the same prior-year periods was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 20% and 18%, respectively, in the three and six months ended June 30, 2008, which was driven by an increase in the number of average paying subscribers of 23% and 22%, respectively. This increase was partially offset by a decline in monthly DVD rentals per average paying subscriber attributed to the continued popularity of our lower priced plans.

 

  •  

Postage and packaging expenses increased by 25% and 23%, respectively, in the three and six months ended June 30, 2008. This was primarily attributable to an increase in the number of DVDs mailed to paying subscribers and increases in the rates of first class postage in May 2007 and May 2008.

 

  •  

Content library amortization decreased by 6% in the three months ended June 30, 2008. This decrease was primarily attributable to decreased content library acquisitions resulting from an increase in the number of DVDs subject to revenue sharing agreements. Content library amortization for the six months ended June 30, 2008 was relatively flat.

 

  •  

Revenue sharing expenses increased by 14% and 3%, respectively, in the three and six months ended June 30, 2008. This increase was primarily attributable to an increase in the number of DVDs subject to revenue sharing agreements mailed to paying subscribers coupled with the increases in the number of average paying subscribers.

 

27

Table of Contents

Three months ended June 30, 2008 as compared to the three months ended March 31, 2008

The increase in cost of subscription revenues for the three months ended June 30, 2008 as compared to the three months ended March 31, 2008 was primarily attributable to the following factors:

 

  •  

Revenue sharing expenses increased by 18%. This was primarily attributable to an increase in the number of DVDs subject to revenue sharing agreements mailed to paying subscribers, coupled with an increase in the number of average paying subscribers.

 

  •  

Content library amortization decreased by 7%. This was primarily attributable to decreased content library acquisitions resulting from an increase in the number of DVDs subject to revenue sharing agreements, a decrease in back catalog DVD purchases and a seasonal decline in the purchase of new release DVDs.

This excerpt taken from the NFLX 10-Q filed May 6, 2008.

Subscription

 

     Three Months Ended     Change  
     March 31,
2008		     December 31,
2007		     March 31,
2007		     Q1’08 vs.
Q1'07		     Q1’08 vs
Q4'07		  
     (in thousands, except percentages)  

Subscription

    $ 187,156     $ 168,673     $ 165,189     13.3 %   11.0 %

As a percentage of revenues

      57.4 %     55.8 %     54.1 %    

Three months ended March 31, 2008 as compared to the three months ended March 31, 2007

The increase in cost of subscription revenues for the three months ended March 31, 2008 as compared to the same prior-year period was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 15%, which was driven by a 20% increase in the number of average paying subscribers, partially offset by a decline in monthly DVD rentals per average paying subscriber attributed to the continued popularity of our lower priced plans.

 

  •  

Postage and packaging expenses increased by 21%. This increase was primarily attributable to an increase in the number of DVDs mailed to paying subscribers and an increase in the rate of first class postage in the amount of $0.02 effective May 2007.

 

  •  

Content library amortization increased by 16%. This increase was primarily attributable to increased content library acquisitions in order to support the growth of our subscriber base.

 

  •  

Revenue sharing expenses decreased by 7%. This decrease was primarily attributable to a decrease in the percentage of DVDs subject to revenue sharing agreements mailed to paying subscribers, partially offset by the increase in the number of average paying subscribers.

 

20

Table of Contents

Three months ended March 31, 2008 as compared to the three months ended December 31, 2007

The increase in cost of subscription revenues for the three months ended March 31, 2008 as compared to the three months ended December 31, 2007 was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 18%, which was driven by a 9% increase in the number of average paying subscribers and an increase in monthly DVD rentals per average paying subscriber attributed to a seasonal increase in disc usage.

 

  •  

Postage and packaging expenses increased by 17%. This increase was primarily attributable to an increase in the number of DVDs mailed to paying subscribers and the monthly DVD rentals per average paying subscriber due to a seasonal increase in disc usage.

 

  •  

Content library amortization remained relatively flat.

 

  •  

Revenue sharing expenses increased by 11%. This increase was primarily attributable to the increase in the number of average paying subscribers offset by a decrease in the percentage of DVDs subject to revenue sharing agreements mailed to paying subscribers.

This excerpt taken from the NFLX 10-K filed Feb 28, 2008.

Subscription

 

     Year Ended December 31,  
     2007     2006     2005  
     (in thousands, except percentages)  

Subscription

    $ 664,407     $ 532,621     $ 393,788  

As a percentage of revenues

      55.1 %     53.4 %     57.7 %

Percentage change over prior period

      24.7 %     35.3 %  

The increase in cost of subscription revenues in absolute dollars for 2007 as compared to 2006 was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 20%. This was driven by a 32% increase in the number of average paying subscribers, partially offset by a decline in monthly movie rentals per average paying subscriber attributed to the continued growth of our lower priced plans.

 

  •  

Postage and packaging expenses increased by 24%. This was primarily attributable to the increase in the number of DVDs mailed to paying subscribers, as well as an increase in the rate of first class postage of 2 cents in May 2007.

 

  •  

Content amortization increased by 39% primarily due to increased acquisitions of our content library, while revenue sharing expenses remained flat. In addition, costs related to our instant-watching feature have been included in cost of subscription revenues since its introduction in January 2007.

 

34

Table of Contents

The increase in cost of subscription revenues in absolute dollars for 2006 as compared to 2005 was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 42%. This was driven by a 60% increase in the number of average paying subscribers offset by a slight decline in monthly movie rentals per average paying subscriber attributed to the increased popularity of our lower priced plans.

 

  •  

Postage and packaging expenses increased by 48%. This was primarily attributable to the increase in the number of DVDs mailed to paying subscribers, as well as the first class postage rate increase of 2 cents that was effective January 8, 2006.

 

  •  

DVD amortization increased by 47% primarily due to increased acquisitions for our DVD library.

 

  •  

Revenue sharing expenses increased by 10%. This increase was primarily attributable to the increase in the number of average paying subscribers offset by a decrease in the percentage of DVDs subject to revenue sharing agreements mailed to paying subscribers.

This excerpt taken from the NFLX 10-Q filed Nov 2, 2007.

Subscription

 

     Three Months Ended     Change     Nine Months Ended     Change  
     September 30,
2006		     June 30,
2007		     September 30,
2007		     Q3’07
vs.
Q3’06		     Q3’07
vs
Q2’07		     September 30,
2006		     September 30,
2007		     Q3’07
vs.
Q3’06		  
     (in thousands, except percentages)        

Subscription

    $ 135,210     $ 166,838     $ 163,707     21.1 %   (1.9 %)   $ 390,035     $ 495,734     27.1 %

As a percentage of revenues

      52.8 %     54.9 %     55.6 %         54.2 %     54.9 %  

Cost of subscription revenues consists of postage and packaging expenses, amortization of our content library and revenue sharing expenses related to shipping titles and the Internet-based delivery of content to paying subscribers. Costs related to free-trial subscribers are allocated to marketing expenses.

Three and nine months ended September 30, 2006 as compared to the three and nine months ended September 30, 2007

The increase in cost of subscription revenues for the three months and nine months ended September 30, 2007 as compared to the same prior-year periods was primarily attributable to the following factors:

 

  •  

The number of DVDs mailed to paying subscribers increased 15% and 22% in the three and nine months ended September 30, 2007, respectively, which was driven by an increase of 28% and 36%, respectively, in the number of average paying subscribers. This increase was partially offset by a decline in monthly movie rentals per average paying subscriber attributed to the continued growth of our lower priced plans.

 

  •  

Postage and packaging expenses increased by 21% and 25% in the three and nine months ended September 30, 2007, respectively. This increase was primarily attributable to an increase in the average number of paying subscribers and the number of DVDs mailed to paying subscribers, as well as an increase in the rate of first class postage in the amount of $0.02 in May 2007. This increase was offset by a decline in monthly movie rentals per average paying subscriber due to the continued growth of our lower priced subscription plans.

 

  •  

Content amortization increased by 27% and 51% in the three and nine months ended September 30, 2007, respectively. This increase was primarily attributable to increased acquisitions of our content library. In addition, costs related to our instant-viewing feature have been included in costs of subscriptions since its introduction in January 2007.

 

22

Table of Contents

Three months ended June 30, 2007 as compared to the three months ended September 30, 2007

Cost of subscription revenues for the three months ended September 30, 2007 decreased as compared to the three months ended June 30, 2007 due to a decrease in revenue sharing expenses and disc depreciation resulting from a decrease in content acquisitions during the third quarter of 2007, offset by an increase in postage and packaging expenses and an increase in content costs related to our instant-viewing feature. This decrease in content acquisitions was primarily attributable to the seasonal decline in studio output during the three months ended September 30, 2007.

EXCERPTS ON THIS PAGE:

10-Q
May 8, 2009
10-K (4 sections)
Feb 25, 2009
10-Q
Nov 3, 2008
10-Q
Aug 11, 2008
10-Q
May 6, 2008
10-K
Feb 28, 2008
10-Q
Nov 2, 2007

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